Spurred by the shale drilling rush that has progressed at breakneck speed, the railroad industry has moved fast to help drillers transport petroleum and its byproducts to consumers. Last year, trains hauled over 400,000 carloads of crude oil, up from just 9,500 carloads in 2008, according to railroad industry estimates. Each carload represents roughly 30,000 gallons of flammable liquids, and some trains haul over 100 oil cars at a time.
But with this fast expansion has come some astounding risks — risks that have insurance companies and underwriters increasingly concerned.
A string of oil train explosions have highlighted the potential for harm. A train hauling 2.9 million gallons of Bakken oil derailed and exploded on November 8 in Aliceville, Alabama, and the oil that leaked but did not burn continues to foul the wetlands in the area.
On December 30th, a train collision in Casselton, North Dakota 20 miles outside of Fargo, prompted a mass evacuation of over half the town’s residents after 18 cars exploded into fireballs visible for miles. 400,000 gallons of oil spilled after that accident, which involved two trains traveling well below local speed limits.
As detailed in the article, many companies do not carry enough insurance to stay viable if there is an accident in a populated area. They expect to go bankrupt and then just start again.
“There is not currently enough available coverage in the commercial insurance market anywhere in the world to cover the worst-case scenario,” James Beardsley, an executive with Marsh & McLennan Cos.’ Marsh Inc. insurance brokerage unit, told the Wall Street Journal in January.
They expect the taxpayer to take up the slack. Privatizing profits and socializing risk. This is not capitalism. And it is a big problem with our current system.
There is no incentive to fix the problem because the necessary disincentives of the marketplace have been removed. Why figure out a safer approach when the people will take on any moral hazard?
This will continue until people realize that so many of the authoritarians are quite happy screwing over the rest of us by making us pay for their risks, all so they can make more money.
No transporter of dangerous and deadly cargo should be allowed to be in business without the necessary insurance. If they cannot get some, then maybe they should work at making it safer. Spend some of their own profits rather than expecting the taxpayers to do it for them.